THE MIRACLE OF PRODUCTION - CHALLENGES AND INNOVATION IN ROUGH DIAMOND PRODUCTION

The Canadian Arctic and southern Botswana are a long way from the diamond jewellers of
Fifth Avenue in New York, Times Square in Hong Kong, Bond Street in London and Place Vendome in Paris.

Diamonds were formed within the earth’s sub-cratonic lithospheric mantle by processes more than three
billion years ago. They tend to occur within ancient and stable parts of the earth’s crust, known as cratons,
where they have been protected from destructive geological processes and were then transported to the earth’s
surface within kimberlite.

Escalating cost and complexity

The cost and capital intensity of diamond mining projects are rising, for three main reasons. Firstly, global demand for capital goods has driven price increases in equipment. At the same time, operating costs in some of the major mining geographies have increased significantly over the last few years. In Botswana, for example, the cost of electricity increased 11 per cent per year between 2002 and 2012 and labour costs increased 14 per cent per year. In Russia, the price of electricity increased 12 per cent per year over the same period and labour costs 19 per cent, while in South Africa power prices have risen by an average of 14 per cent over the same period.

Secondly, diamond miners are developing deeper and more remote parts of existing deposits, such as Jwaneng Cut 8 or the Venetia underground mine. Finally, new projects are further away, in more hostile natural environments that include the Arctic. Such operations are inherently more complex to run and involve greater infrastructure investments.

Looking for broader economic and social contributions

With lifespans that can cover decades, mining projects require large-scale and long-term capital investment, often reaching billions of US dollars. This investment often attracts significant additional inward investment to host countries. It results in direct economic and fiscal benefits including infrastructure development, provision of local healthcare and education, direct employment, and payment of taxes and royalties. Indirect benefits include the development of a supply chain to support the mining operations, skills development, indirect employment and community support.

In 2013, De Beers distributed more than US$5 billion - or over 90 per cent of the value of total sales - to governments, suppliers, employees, shareholders and other finance providers. And of this, more than US$3 billion was paid to stakeholders in Africa, where De Beers has the greatest proportion of its operations.

DIAMONDS IN THE DESERT 1/2

It’s in Botswana, a sparsely populated country in southern Africa, that Jwaneng, one of the most valuable
diamond mines in the world, was discovered in 1972 by De Beers’ geologists. Ten years later, the mine
commenced operations, yielding about 12 million carats per year.
The ore that is mined at Jwaneng is particularly rich in high-quality diamonds. Jwaneng represents 60-70 per cent
of the overall revenues of Debswana, the joint venture between De Beers and the Government of the Republic
of Botswana.

The mine has been extended through various programmes, gradually unearthing new parts of the ore body by
deepening the mine pit. The most recent of these projects, known as Cut 8, will remove an initial
500 million tonnes of waste earth to expose the ore and, ultimately, recover more than 100 million
additional carats and prolong the life of the mine to at least
2028. The project began in 2010 and the total investment cost is US$3 billion – the single largest
private investment in Botswana’s history.

DIAMONDS IN THE DESERT 2/2

Mining always carries safety risks, and while
open-pit mines such as Jwaneng are generally seen as
safer than underground mines, risks remain. Technology can help improve safety, however: in October 2013, a
slope failure was predicted using stability analysis. As a result, the mine was evacuated ahead of the actual
slope collapse and no workers were harmed, unlike an earlier instance in 2012, when a similar incident
tragically resulted in a loss of life.

FIRE IN THE ICE

Thousands of miles lie between the heat of Botswana and the frozen lakes of the Canadian Arctic. Canada has been
home to some of the largest recent developments of diamond mines; however, mining in the Arctic carries particular
challenges. One example of this is De Beers’ mine at Snap Lake in the Northwest Territories.

Calinda, a lube truck operator underground, is 31 years old and has worked at Snap Lake since she completed the Underground Mine Training Program in 2008.
“These past 4.5 years as a female underground miner have been an honour,” said Calinda.

She typically works a 12-hour shift for two weeks on the mine, before returning home to the Tlicho community of Wekweeti
for the next two weeks. The mine can only be accessed by plane, so she and her colleagues catch a special charter flight
for De Beers employees to and from the mine from Yellowknife, and then board another plane home.

At Snap Lake, it is dark and remains so throughout most of the day. Temperatures can go down to -45 degrees Celsius and
colder on the surface, although down in the mine it’s warmer, where the air is heated to an average temperature of three
to five degrees Celsius. De Beers provides all the warm clothing and safety items required for each employee to do his
or her work safely.

TREASURES OF THE DEEP 1/2

In 1908, railway worker Zacharias Lewala was shovelling sand off a railway line in Kolmanskop, and picked up several stones, thereby unknowingly starting a diamond rush in Namibia.
But how did this whole coastline along southwest Africa come to be strewn with diamonds?

It’s another quirk of nature. Millions of years ago, glacial floods carried diamonds down the Orange River from some 500
miles inland and out to sea. Over millennia, the diamonds tumbled along the riverbed, in the process being naturally
cleaned and polished, and arrived on the seabed in near-perfect form.

It has taken a massive investment in new offshore mining technology by De Beers to enable these diamonds to be brought
to the surface.

TREASURES OF THE DEEP 2/2

The ‘mv Mafuta’ is the latest of Debmarine Namibia’s five deep sea mining vessels. At a cost of more than US$100 million,
it is the largest of Debmarine Namibia’s fleet. The ship is automatically kept in position by a
GPS that moves both the ship and the crawler along predetermined tracks to comb the seabed areas that are
most likely to yield the largest number of high-quality gems. Four hundred tonnes of sediment are pumped aboard every hour.
The sediment enters an unceasing production line where it is automatically sized and separated, and the diamonds sealed in
cans, a complex process untouched by human hands.

Once the diamonds are extracted, the sediment is returned to the seabed to minimise environmental damage. Once a month,
amid the strictest security, the diamonds are brought ashore by helicopter as their long journey to diamond jewellery
retail stores all over the world begins.